This morning I was watching the former head of the IMF (international monetary fund) on Washington Journal.
He was on to explained the debt and also the problems with Greece and other countries in the European Union and what it could mean.
However, he spoke alot about the 'too big to fail' banks here in this country and the crash.
He also has a book, 13 Bankers: Wall Street Takeover and the Next Financial Meltdown.
I looked the book up on Amazon and one of the reviews wrote about an article he wrote for the Atlantic some months ago. I clicked and read 'The Quiet Coup" and found this article to be something I would strongly recommend everyone to read:
http://www.theatlantic.com/...
Simon Johnson begins the article telling about the IMF and how they helped emerging economies and the needed steps to pull them back from the brink and to set them on a good path.
In those instances the problems that caused these economies to go shaky were the same ones that are now plaguing this country. The difference is that we are the first established economy to face these types of problems.
Johnson lays out the senario played time and again by different countries and the similarity they have with the US.
Here is a small portion of this senario:
In its depth and suddenness, the U.S. economic and financial crisis is shockingly reminiscent of moments we have recently seen in emerging markets (and only in emerging markets): South Korea (1997), Malaysia (1998), Russia and Argentina (time and again). In each of those cases, global investors, afraid that the country or its financial sector wouldn’t be able to pay off mountainous debt, suddenly stopped lending. And in each case, that fear became self-fulfilling, as banks that couldn’t roll over their debt did, in fact, become unable to pay. This is precisely what drove Lehman Brothers into bankruptcy on September 15, causing all sources of funding to the U.S. financial sector to dry up overnight. Just as in emerging-market crises, the weakness in the banking system has quickly rippled out into the rest of the economy, causing a severe economic contraction and hardship for millions of people.
But there’s a deeper and more disturbing similarity: elite business interests—financiers, in the case of the U.S.—played a central role in creating the crisis, making ever-larger gambles, with the implicit backing of the government, until the inevitable collapse. More alarming, they are now using their influence to prevent precisely the sorts of reforms that are needed, and fast, to pull the economy out of its nosedive. The government seems helpless, or unwilling, to act against them.
In the article I think the following is the most important to understanding how and why our officials on both sides cannot stand up to Wall Street:
In a primitive political system, power is transmitted through violence, or the threat of violence: military coups, private militias, and so on. In a less primitive system more typical of emerging markets, power is transmitted via money: bribes, kickbacks, and offshore bank accounts. Although lobbying and campaign contributions certainly play major roles in the American political system, old-fashioned corruption—envelopes stuffed with $100 bills—is probably a sideshow today, Jack Abramoff notwithstanding.
Instead, the American financial industry gained political power by amassing a kind of cultural capital—a belief system. Once, perhaps, what was good for General Motors was good for the country. Over the past decade, the attitude took hold that what was good for Wall Street was good for the country. The banking-and-securities industry has become one of the top contributors to political campaigns, but at the peak of its influence, it did not have to buy favors the way, for example, the tobacco companies or military contractors might have to. Instead, it benefited from the fact that Washington insiders already believed that large financial institutions and free-flowing capital markets were crucial to America’s position in the world.
Johnson says that in Washington a kind of cult of personality (or corporation) grew about Goldman Sachs. It became seen in Washington that Goldman Sachs was a kind of Public Service in itself.
As hard as it is to believe, this is how many see these former employees and executives who trek to Washington to work. The government sees their time at Goldman Sachs as a kind of training ground for public service (!!!)
Washington bought into the whole cult of Wall Street and as Johnson writes here, hence my title, a whole generation of lawmakers grew mezmerized by the cult of Wall Street and the money men:
A whole generation of policy makers has been mesmerized by Wall Street, always and utterly convinced that whatever the banks said was true. Alan Greenspan’s pronouncements in favor of unregulated financial markets are well known. Yet Greenspan was hardly alone. This is what Ben Bernanke, the man who succeeded him, said in 2006: "The management of market risk and credit risk has become increasingly sophisticated. ... Banking organizations of all sizes have made substantial strides over the past two decades in their ability to measure and manage risks."
Now Washington, democrat and republican, are expected to go against the cult of worship of Wall Street and come down hard on them.
You have to see that when a lawmaker was young, in their twenties in the early 80s, they are around 50 today. They spent their adult lives being hammered with this cult of Wall Street. That Gordon Gekko mantra of 'Greed is Good'.
It is not that they have been bought off so much as they are mezmerized and idolize and totally trust in the godliness of Wall Street.
And it was not just lawmakers. The cult of Wall Street extended to economists and professors, ect:
Wall Street’s seductive power extended even (or especially) to finance and economics professors, historically confined to the cramped offices of universities and the pursuit of Nobel Prizes. As mathematical finance became more and more essential to practical finance, professors increasingly took positions as consultants or partners at financial institutions. Myron Scholes and Robert Merton, Nobel laureates both, were perhaps the most famous; they took board seats at the hedge fund Long-Term Capital Management in 1994, before the fund famously flamed out at the end of the decade. But many others beat similar paths. This migration gave the stamp of academic legitimacy (and the intimidating aura of intellectual rigor) to the burgeoning world of high finance.
As more and more of the rich made their money in finance, the cult of finance seeped into the culture at large. Works like Barbarians at the Gate, Wall Street, and Bonfire of the Vanities—all intended as cautionary tales—served only to increase Wall Street’s mystique. Michael Lewis noted in Portfolio last year that when he wrote Liar’s Poker, an insider’s account of the financial industry, in 1989, he had hoped the book might provoke outrage at Wall Street’s hubris and excess. Instead, he found himself "knee-deep in letters from students at Ohio State who wanted to know if I had any other secrets to share. ... They’d read my book as a how-to manual." Even Wall Street’s criminals, like Michael Milken and Ivan Boesky, became larger than life. In a society that celebrates the idea of making money, it was easy to infer that the interests of the financial sector were the same as the interests of the country—and that the winners in the financial sector knew better what was good for America than did the career civil servants in Washington. Faith in free financial markets grew into conventional wisdom—trumpeted on the editorial pages of The Wall Street Journal and on the floor of Congress.
The article is long and the list of the list of deregulation and legislation that talks about what was done to this economy in just the past decade is stunning.
Mostly, we cannot just assume that our politicians are bought and pressured by lobbyists for the banking industry and that is why they are so weak willed when it comes to reform.
It's more a cult and worship for the bankers and 'greed is good' mentality that grew around this past era that has its hold on them. A complete and total belief in the markets and the power and good of Wall Street and it's bankers.
It is similar to wresting away control of Fox news and their misinformation from a rightwinger. No matter how ridiculous and silly the stuff they spew, the true believers will always watch without questioning what they are told.
The article is much longer then what I posted here. This is just a sample of the insights from it. And the understanding of what and why in this fiasco and the unwillingness of congress to regulate and stand up to Wall Street, knowing how dangerous to the country and our economy it has become.